The first quarter of the year is usually quiet for solar, but Q1 2021 has instead seen an incredible surge in demand, with China, the USA, and India all expected to set annual installation records. Our forecast suggest we will hit 178 GW, up from 146.5 GW in 2020.
Two fundamental ways to gauge the scale of the industry are manufacturing capacity and – at least this year – the supply of raw materials.
Specifically, polysilicon remains a harsh limiting factor on the solar industry, especially for the Chinese factories whose exports amount to about 50% of global supply (not counting domestic demand). That’s not so much because the supply of polysilicon was impacted by last year’s accidents; by now the factories have been repaired, and the widespread expectation was that prices would continue to decline from the July spike by a few percent each fortnight.
The surprise skyrocketing demand instead saw a new six-year peak price occur in recent weeks, with this week seeing another 4% rise to $16.3 per kilogram – about double the price of one year ago, and it’s not done rising yet.
This price rise is still percolating through the downstream supply chain and it’s hard to say how things will turn out – some new polysilicon factories will open in the final quarter of the year and ease supply somewhat at the 11th hour. But what makes this kind of supply chain issue not a negative sign compared to last year, is that it’s driven by high demand. As such, it will limit the increase of solar development, but it cannot, by definition, reduce it.
China now accounts for about 80% of the global polysilicon supply and its output in Q1 2021 is set to be 109,100 tons. We have estimated this year’s actual global polysilicon output at 570,000 tons, and we believe polysilicon usage will fall to 3 grams per Watt as companies switch to thinner wafer designs. That places a physical limit of 190 GW on the industry for this year, considerably below the 209 GW which Bloomberg has forecast as its upper limit for the year. It may be right about the demand side, but perhaps not the supply side.
As this 190 GW absolute limit of polysilicon production is approached, prices become prohibitively high, with developers and downstream manufacturers likely to delay things in the expectation of a future price fall. That means the 190 GW top range cannot actually be reached, and moreover there is a moderate time delay between manufacturing and deployment, which is one reason our prediction comes in at 178 GW.
Polysilicon can be expected to persist as a limiting factor into 2022 if EnergyTrend’s prior estimate of 710,000 tons of supply in that year proves correct – but the expansions announced in China are vast, with individual factories amounting to at least tens of thousands of tons each, in one case 100,000 tons from a single complex. So this supply issue won’t last forever, though it will be a boon for non-silicon solar tech such as perovskites and First Solar’s CdTe modules.
Another sign of the scale of solar to come has been the truly vast expansion of China’s cell, wafer and module factories, which will see the country strengthen its existing dominance in every market that doesn’t combine import duties with a domestic industry.
According to statistics collated by the “Polaris Solar Photovoltaic Network” and released two weeks ago, manufacturing capacity upgrades announced so far in 2021 amounted to 174 GW for rods and wafers, 92 GW for cells, and 58 GW for modules. This is consistent with a previously observed trend that China’s solar industry is growing by around 100 GW manufacturing capacity per year. With constant obsolescence of production lines and other issues, that doesn’t mean its output is growing quite so swiftly, but it is reason to expect solar development worldwide will grow by around 20% year-on-year for a couple of years from now.
We’re also looking at a major increase this year from the perspective of demand within the major markets. China is expected to install between 55 GW and 65 GW this year according to its Photovoltaic Industry Association, which estimated 2020 additions 8 GW lower than they turned out. The USA’s solar deployment is being boosted by the Biden Administration, and India will come roaring back with easily 12 GW thanks to a backlog from 2020 when it installed only 3.2 GW. A host of smaller markets such as Taiwan, the UK and Poland are showing signs of strong acceleration, more than enough to outweigh the handful of nations which will install less solar this year, such as South Korea, Vietnam and Mexico.